Reducing Construction Risk from Cost and Supply Chain Issues

It’s true. All we hear about today is about the record high materials price increases. With the U.S. economy ramping up, the demand for materials such as steel and lumber has quickly outpaced its supply. Now let’s add to that the tariffs placed on the imports of products like steel that are eliminating the ability to be competitive. It’s no secret construction costs for projects will be going up if materials orders haven’t been secured.

Unfortunately, that isn’t where the construction risk ends. A domino effect from having too little supply has resulted in an extraordinary supply chain event for contractors and vendors alike. Not only are the materials more costly, but the lead times for both the fabrication and delivery have become severely impacted. Construction projects are now at high risk of going both over budget and beyond schedule, and this is not expected to be resolved over the next few months, but will last at least for the balance of the contracts in progress and those being entered into now.

In this GlobeSt article, Partner’s Robert Barone offers suggestions on how to conduct a thorough due diligence during both the pre-closing and post-closing of construction loans, while taking into account the current economic climate and recent construction contract trends.